Exam 2 practice
Which of the following choices is not an additional strategic choice that a company makes once it has decided to employ a particular generic competitive strategy? Multiple Choice go on the offensive and initiate aggressive strategic moves to improve the company's market position. bolster the company's market position by merging with or acquiring another company. form strategic alliances and collaborative partnerships to add to its accumulation of resources and competitive capabilities. integrate forward or backward into more stages of the industry value chain. discontinue disruptive product innovation.
discontinue disruptive product innovation
The purposes of defensive strategies include Multiple Choice discouraging deep price discounting on the part of ambitious rivals seeking to capture additional sales and market share. lowering the risk of being attacked by rivals, weakening the impact of any attack that occurs, and influencing challengers to aim their offensive efforts at other rivals. insulating a company from the impact of competitive pressures and industry driving forces. weakening competitors in ways that make them largely irrelevant. widening a company's competitive advantage over its rivals
lowering the risk of being attacked by rivals, weakening the impact of any attack that occurs, and influencing challengers to aim their offensive efforts at other rivals.
Determining whether a company's prices and costs are competitive Multiple Choice requires looking at the costs of a company's internally performed activities and the costs of its suppliers and forward channel allies (distributors/dealers). requires performing pricing surveys on at least a quarterly basis. involves developing close relationships with buyers to determine if the market is showing signs of increasing price sensitivity. typically involves the use of activity-based cost accounting by the company's key retail customers. is a technique to evaluate whether a capability or resource is valuable, rare, inimitable, or nonsubstitutable.
requires looking at the costs of a company's internally performed activities and the costs of its suppliers and forward channel allies (distributors/dealers).
Which of the following is not an example of a defensive move to protect a company's market position and restrict a challenger's options for initiating competitive attack? Multiple Choice Granting volume discounts or better financing terms to dealers/distributors and providing discount coupons to buyers to help discourage them from experimenting with other suppliers or brands Signaling challengers that retaliation is likely in the event they launch an attack Publicly committing the company to a policy of matching a competitors' terms or prices Maintaining a war chest of cash and marketable securities Challenging struggling runner-up firms that are on the verge of going under
Challenging struggling runner-up firms that are on the verge of going under
Vertical integration strategies Multiple Choice extend a company's competitive and operating scope because its operations extend across more parts of the total industry value chain. are one of the best strategic options for helping companies win the race for global market leadership. are a cost-effective means of expanding a company's lineup of products and services. are particularly effective in boosting a company's ability to expand into additional geographic markets, particularly the markets of foreign countries. are a good strategy option for improving a company's supply chain management capabilities, pursuing efforts to remodel a company's value chain, achieving direct control over the costs of performing value chain activities, and gaining access to buyers.
Extend a company's competitive and operating scope because its operations extend across more parts of the total industry value chain
Which of the following is not one of the five generic types of competitive strategy? Multiple Choice Best-cost provider strategy Broad low-cost provider strategy Focused differentiation provider strategy Focused low-cost provider strategy Focused best-cost provider strategy
Focused Best-cost provider strategy
Which of the following is not a good option for trying to remedy high internal costs vis-à-vis rival firms? Multiple Choice Investing in productivity-enhancing, cost-saving technological improvements Redesigning the product or some of its components to permit more economical manufacture or assembly Implementing aggressive strategic resource mapping to permit across-the-board cost reduction Outsourcing high-cost activities to vendors or contractors who can perform them more economically Relocating high-cost activities (such as manufacturing) to geographic areas (such as China or Latin America or Eastern Europe) where they can be performed more cheaply
Implementing aggressive strategic resource mapping to permit across-the-board cost reduction
Which of the following is not an option for remedying a forward channel-related cost disadvantage? Multiple Choice Negotiate more favorable prices with suppliers. Integrate forward into company-owned retail outlets. Collaborate closely with forward channel allies to identify mutual cost-saving opportunities. Change to a more economical distribution strategy. Pressure dealer-distributors to reduce their costs and markups.
Negotiate more favorable prices with suppliers.
Which one of the following is an example of an offensive strategy? Multiple Choice Blocking the avenues open to challengers Signaling challengers that retaliation is likely Pursuing continuous product innovation to draw sales and market share away from less innovative rivals Introducing new features or models to fill vacant niches in its overall product offering and better match the product offerings of key rivals Maintaining a war chest of cash and marketable securities
Pursuing continuous product innovation to draw sales and market share away from less innovative rivals
Which one of the following is not a reliable measure of how well a company's current strategy is working? Multiple Choice Trends in the company's sales and earnings growth The company's development of human capital, organizational capital, and information capital Changes in the firm's image and reputation with its customers The company's overall financial strength Evidence of improvement in internal processes such as defect rate, order fulfillment, and employee productivity
The company's development of human capital, organizational capital, and information capital
What does the scope of the firm refer to? Multiple Choice The firm's capability to employ vertical integration strategies The combining of two or more companies into a single corporate entity (with the newly created company often taking on a new name) The range of activities the firm performs internally and the breadth of its product offerings, the extent of its geographic market, and its mix of businesses The ability of the firm to gain competitive advantage based on where it locates its various value chain activities The ability of the firm to prevent foreign competition from affecting the market
The range of activities the firm performs internally and the breadth of its product offerings, the extent of its geographic market, and its mix of businesses
Which of the following is not one of the pitfalls of a low-cost provider strategy? Multiple Choice Overly aggressive price cutting Using a cost-based advantage to improve the company's bargaining position with high-volume buyers Using approaches to reducing costs that can be easily copied by rivals Cutting prices more than the size of a company's cost advantage Becoming so fixated on cost reductions that products become too features-poor
Using a cost-based advantage to improve the company's bargaining position with high-volume buyers
____________ is the extent to which a firm's internal activities encompass one, some, many, or all activities that make up an industry's entire value chain system.
Vertical Scope
Which of the following is not one of the five questions that comprise the task of evaluating a company's competitive strength and cost structure? Multiple Choice How well is the company's strategy working? What are the company's competitively important resources and capabilities? Are the company's cost structure and customer value proposition competitive? What are the company's most and least profitable geographic segments? What strategic issues and problems merit front-burner managerial attention?
What are the company's most and least profitable geographic segments?
Which one of the following does not represent market circumstances that make a focused low-cost or focused differentiation strategy attractive? Multiple Choice When it is costly or difficult for multisegment competitors to meet the specialized needs of the target market niche and at the same time satisfy the expectations of their mainstream customers When the industry has many different segments and market niches, thereby allowing a focuser to pick an attractive niche suited to its resource strengths and capabilities When industry leaders have chosen not to compete in the niche When the target market niche is big enough to be profitable and offers good growth potential When buyers are not strongly brand loyal and a large number of other rivals are attempting to specialize in the same target segment
When buyers are not strongly brand loyal and a large number of other rivals are attempting to specialize in the same target segment
When looking at the entire industry, the main areas in a company's overall value chain where important differences between a firm's cost and value do not occur are in Multiple Choice a company's own internal activities. the supplier's industry value chain. the forward channel portion of the industry chain. a company's own internal activities, the supplier's industry value chain, and the forward channel portion of the industry chain. a company's external activities, the supplier's part of the industry value chain, and the buyer's ability to integrate backwar
a company's own internal activities, the supplier's industry value chain, and the forward channel portion of the industry chain
Broad differentiation strategies generally work best in market circumstances where Multiple Choice buyer needs and preferences are too diverse to be fully satisfied by a standardized product. most buyers have similar needs and use the product in similar ways. the products of rivals are weakly differentiated and most competitors are resorting to clever advertising to try to set their product offerings apart. buyers are price sensitive and buying switching costs are quite low. the five competitive forces are strong.
buyer needs and preferences are too diverse to be fully satisfied by a standardized product.
Successful differentiation allows a firm to Multiple Choice command the largest market share in the industry. set the industry ceiling on price. avoid being overly concerned about whether entry barriers into the industry are high or low. command a premium price for its product and/or increase unit sales and/or gain buyer loyalty to its brand. take sales and market share away from rivals by undercutting them on price.
command a premium price for its product and/or increase unit sales and/or gain buyer loyalty to its brand.
The two most important parts of SWOT analysis are Multiple Choice pinpointing the company's competitive assets and pinpointing its competitive liabilities. identifying the company's resource strengths and identifying the company's best market opportunities. identifying the external threats to a company's future profitability and pinpointing how many market opportunities it has. drawing conclusions from the SWOT listings about the company's overall situation and translating these conclusions into strategic actions to better match the company's strategy to its resource strengths and market opportunities, correct the important weaknesses, and defend against external threats. making accurate lists of the company's strengths, weaknesses, opportunities, and threats, and then using these lists as a basis for ascertaining how well the company's strategy is working.
drawing conclusions from the SWOT listings about the company's overall situation and translating these conclusions into strategic actions to better match the company's strategy to its resource strengths and market opportunities, correct the important weaknesses, and defend against external threats.
Mergers and acquisitions are often driven by such strategic objectives as to Multiple Choice expand a company's geographic coverage, extend its business into new product categories, or gain quick access to new technologies or other resources and capabilities. weaken the bargaining power of either key suppliers or key customers. reduce the company's vulnerability to industry driving forces. facilitate a company's shift from one type of competitive strategy to another. secure a higher credit rating and better access to additional financial capital.
expand a company's geographic coverage, extend its business into new product categories, or gain quick access to new technologies or other resources and capabilities.
A company's biggest vulnerability in employing a best-cost provider strategy is Multiple Choice relying too heavily on outsourcing. getting squeezed between firms employing low-cost provider strategies and those using high-end differentiation strategies. getting trapped in a price war with low-cost leaders. being timid in cutting its prices far enough below high-end differentiators to win away many of their customers. not having a sustainable distinctive competence in cost reduction.
getting squeezed between firms employing low-cost provider strategies and those using high-end differentiation strategies.
Market conditions and factors that tend not to favor first movers include Multiple Choice growth in demand that depends on the development of complementary products or services that are not currently available and new industry infrastructure that is needed before buyer demand can surge. quick market penetration and strong loyalty among first-time customers. buyer behavior that is readily attracted to new technology or product features. conditions that make imitation difficult and absolute cost advantages that accrue to those who make early commitments to new technologies, components, or distribution channels. when technology is not rapidly evolving and buyers' expectations are not likely to be subject to change.
growth in demand that depends on the development of complementary products or services that are not currently available and new industry infrastructure that is needed before buyer demand can surge.
Low-cost leaders who have the lowest industry costs are likely to Multiple Choice pursue backward or forward integration to detour suppliers or buyers with considerable bargaining power and leverage. move the performance of most or all value chain activities to low-wage countries. sell directly to users of their product or service and eliminate the use of wholesale and retail intermediaries. have outmanaged its rivals in finding ways to perform value chain activities more cost-effectively be considering exiting the current product market and using their competitive low-cost strength to gain a competitive advantage in other product arenas.
have outmanaged its rivals in finding ways to perform value chain activities more cost-effectively
The value of doing competitive strength assessment is to Multiple Choice determine the competitiveness of the company's core competencies. learn if the company's market opportunities are better than those of its rivals. learn whether a company has a distinctive competence. learn how the company ranks relative to rivals on each of the important factors that determine market success and ascertain whether the company has a net competitive advantage or disadvantage vis-à-vis key rivals. determine whether a company's resource strengths are sufficient to allow it to earn bigger profits than rivals.
learn how the company ranks relative to rivals on each of the important factors that determine market success and ascertain whether the company has a net competitive advantage or disadvantage vis-à-vis key rivals
A focused low-cost strategy seeks to achieve competitive advantage by Multiple Choice outmatching competitors in offering niche members an absolute rock-bottom price. delivering more value for the money than other competitors. performing the primary value chain activities at a lower cost per unit than can the industry's low-cost leaders. dominating more market niches in the industry via a lower cost and a lower price than any other rival. serving buyers in the target market niche at a lower cost and lower price than rivals.
serving buyers in the target market niche at a lower cost and lower price than rivals.
A company's strategic options for internally performed value chain activities do not include Multiple Choice revamping its value chain to eliminate or bypass some cost-producing activities (particularly low value-added activities). implementing the use of best practices, particularly for high-cost activities. investing in productivity-enhancing, cost-saving technological improvements. switching to activity-based costing. outsourcing the performance of high-cost activities to vendors that can perform them more cheaply.
switching to activity-based costing.
A differentiation strategy works best when Multiple Choice buyers' needs are homogeneous. many rival firms are also pursuing a differentiation approach. firms have ample excess cash to invest in R&D activities. there are few other ways to make a product unique to buyers. technological change is fast-paced and competition revolves around rapidly evolving product features.
technological change is fast-paced and competition revolves around rapidly evolving product features.
The race among rivals for industry leadership is more likely to be a marathon rather than a sprint when Multiple Choice the market depends on the development of complementary products or services that are currently not available, buyers have high switching costs, and influential rivals are in position to derail the efforts of a first mover. fast followers find it easy to leapfrog the pioneer with even better next-generation products of their own. entry barriers are high, substitute products or services are readily available, and buyers are prone to negotiate aggressively for better terms and lower prices. there are nearly always big advantages to being a slow mover rather than an early mover, especially in regard to avoiding the "mistakes" of first or early movers. new industry or market segments are yet to be developed and create altogether new consumer demand.
the market depends on the development of complementary products or services that are currently not available, buyers have high switching costs, and influential rivals are in position to derail the efforts of a first mover.
Focusing provides the ability to secure a competitive edge, but it also carries some risks that will be detrimental to the focused firm, such as Multiple Choice the chance that competitors will not find effective ways to match the focused company's capabilities in serving the market niche. the potential for the preferences and needs of niche members to shift over time toward mainstream provider product attributes. the potential for the niche to become so attractive that it will not attract new competitors, thereby providing excessive market segment profits. the likelihood that a focused company will become so cost efficient that it will achieve excessive profits. the possibility that a broad low-cost strategy will always trump a firm's best-cost provider strategy.
the potential for the preferences and needs of niche members to shift over time toward mainstream provider product attributes.
A company's value chain identifies Multiple Choice the steps it goes through to convert its net income into value for shareholders. the primary activities that create value for customers and related support activities. the series of steps it takes to get a product from a raw materials stage to a finished product. the activities it performs in transforming its competencies into distinctive competencies. the competencies and competitive capabilities that underpin its efforts to create value for customers and shareholders.
the primary activities that create value for customers and related support activities.